ASX holds above 5000 as miners, banks lead

Positive international news drowned out weaker domestic data this week, helping push the Australian sharemarket higher, with the banks and mining companies making gains.

Markets remain fixated by quantitative easing in the United States and Japan, which is pushing local investors out of cash and fixed income into high-yielding Australian stocks. The Dow’s gains on the back of easy money lead the local index into positive territory.

“The market was up over the week, and the driver of that overall was the lead we got out of the [United] States," said Dalton Nicol Reid chief investment officer
Jamie Nicol
.

“The key thing is the continuation of QE, and there has been a lot of focus on what’s happening in Japan, which is creating interest in our market."

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The S&P/ASX 200 finished the week 122 points, or 2.5 per cent, higher at 5013.5 points. The bourse eked out a gain of 6.4 points, or 0.13 per cent, on Friday. It was the first time the index finished the week above 5000 points since March 15.

Resources companies have been the worst-performing sector on the sharemarket this year – but were the best performing over the week.

Mining stocks were helped by lower-than-expected Chinese inflation data released on Wednesday.

Index heavyweight BHP Billiton jumped 3.4 per cent to $33.35 over the week, while peer Rio Tinto rose 2.3 per cent to $56.90.

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Fortescue Metals Group soared 12.3 per cent to $4.01 on the back of a 3.7 per cent surge in the iron ore price over the week to $US140.90.

China’s inflation was 2.1 per cent in March, down from 3.2 per cent in February and below the market’s expectation of 2.5 per cent. “Softer inflation data from China drove a bit of interest back into the beaten up resources sector," Mr Nicol said.

Woodside’s decision hit mining services companies, which were sold off on Friday. Monadelphous Group was down 3.4 per cent at $22, Boart Longyear shed 3.9 per cent to $1.24 and Bradken plunged 6.2 per cent to $5.79.

Mr Nicol said developments with Woodside’s James Price Point project may have set a precedent for the capital allocation of major resources companies over the next few years.

“There are a few new CEOs out there in the resources sector and this gives them a little bit of a road map on what to do with their capital," he said.

Calibre Group was smashed, with its stock slumping 60 per cent after a profit downgrade that it attributed to a softening coal market and reduced activity on iron ore projects.

Takeover casualties Sundance Resources and Billabong were also among the worst performers of the week, down 53 per cent and 29 per cent respectively.

As bond yields declined, investors moved into banks in a search for yield. Financial companies performed strongly over the week, with Commonwealth Bank of Australia lifting 1.7 per cent to $68.06, Westpac Banking Corp advancing 4.2 per cent to $31.52, National Australia Bank jumping 3.4 per cent to $31.62 and ANZ Banking Group up 3.5 per cent at $28.71.

The searched for yield seemed to take priority over poor domestic unemployment and consumer sentiment data released this week.

Arnhem Investment Management executive chairman
George Clapham
said worse-than-expected data may have increased the chances of the Reserve Bank of Australia cutting interest rates. “Domestically, the unemployment number was not good," he said. “The pull-back in consumer confidence flows through obviously to expectations of further rate cuts. That was a fair driver of domestic news."